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Thursday, April 1, 2010
Marching orders

The King III Code, which came into effect in March, challenges boards of directors to ensure that a company is a responsible corporate citizen that protects, enhances and invests in the wellbeing of the economy, society and the natural environment.

What sounds like a daunting task is, however, made manageable through the delegation of responsibilities among various role players within an organisation. But do business leaders in South Africa understand the specific role they should play in ensuring that an organisation follows an effective sustainability strategy?
Tom Wixley, Chairman of the South African Institute of Chartered Accountants’ (SAICA) ad hoc Committee on Corporate Law Reform, says that the board must decide what economic, social and environmental topics are material to the company concerned. “It then ensures the company’s strategy addresses these topics, sets priorities, and apportions responsibilities between management and board committees,” he says.
Management carries the primary responsibility. It proposes the strategic direction on sustainability to the board, including setting priorities and targets, and is then responsible for implementing strategy, measuring performance and reporting results. In turn the board oversees ‘Board committees’ which support the necessary strategy, for example, in terms of the sustainability, audit, remuneration and risks concerning the business.
The sustainability committee must consider and recommend material sustainability issues to the board, and is responsible for monitoring management’s implementation. “The responsibility of assurance lies with the audit committee which must consider and recommend the company’s assurance level and assurance providers to the board. It also considers the result of internal and external assurance processes, and ensures consistency between sustainability and financial elements of the integrated report,” he explains.
In terms of the remuneration committee’s responsibilities, Wixley says that targets set for incentive schemes should include measures of sustainability. He emphasises that the committee should also determine how performance should be measured, and whether penalties should be used for poor performance.
The risk committee, he says, considers the risks of poor sustainability performance, such as compliance failures (including legal breaches), reputational damage, and possible loss of access to physical resources.

Copyright © Insurance Times and Investments® Vol:23.4 1st April, 2010
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